Sorry if this question isn't directly related to Ethereum, but to DeFi in general.

I understand how we, users of platforms like PancakeSwap, Aave, Curve and such, can profit from these platforms when we deposit in their pools and get a % of the transactions, lend them assets to earn interests, etc. But I don't get how the platforms themselves REALLY make their profit.

PancakeBunny for example: you deposit in one of their pools and they return you the same LP you deposited + BUNNY, or CAKE + BUNNY. So basically, until this point, it's simple because they are giving you what they earn through compounding PancakeSwap rewards PLUS minting their own token for you, which has no cost for them. Now my questions is, how do they exactly profit from this? I can stake any token and they are giving me a lot of interests. What do they do with the assets I have staked/pooled/deposited in their platform to make them profit? Aren't they using those assets to generate my rewards through PancakeSwap (and so, supposedly they couldn't use them in anything else)? I can only imagine they are earning a little bit more % than they are rewarding me, but is it that simple? Or they are doing something we don't know about with those deposited assets?

PancakeBunny was one of many possible examples, but it's almost the same with every farming platform. Maybe even less clear when talking about platforms that don't use other platforms to farm their rewards, like PancakeSwap, Curve and such.

Talking about Curve: for example, there's this DAI + USDC + USDT pool in the Polygon network where you get almost a 4% in the same stablecoins you deposited + 15% of that in MATIC per year. What do they do with your deposit to give you that much? You are giving them non volatile assets and they give you 4% per year in those same assets, and a really nice 15% in MATIC, which you could sell once per week or less to buy more DAI + USDC + USDT and reduce any possible risk associated with crypto volatility. And they don't even mint their own CRV token to reward you for depositing (at least in this pool). So, how do they use your assets for their benefit?

And in the case of platforms like Aave, they even pay you in MATIC for borrowing. How can they pay you for borrowing?

Even knowing that these % decrease over time, I don't get how they can maintain them for that long or how that is profitable for them.

I hope someone with more knowledge about this subject or someone who owns or work for a platform like the ones mentioned can clarify these doubts for me. I'm curious about how it all works behind the scenes.


  • Welcome to the Ethereum Stack Exchange! You should probably have separate, specific questions, for a single protocol.
    – eth
    Jun 12 '21 at 8:50